Texas Bankruptcy Lawyer Explains the Chapter 7 Means Test
Théda Page, principal of The Page Law Firm uses The Means Test to determine qualification for filing Chapter 7 bankruptcy. The Means Test is a formula-based assessment. To determine qualification, several forms (122A-1, 122A-1Supp and 122A-2) must be completed. These forms are part of the process used to determine eligibility based on the following:
- Adjusted Income
- Income Deductions
- Presumption of Abuse
- Special Circumstances
People most likely to be qualified by this test typically have little or no disposable income. This test, which examines the average income of the past six months, only applies to households which exceed the Texas median income. If your income is below the Texas median income, it is often presumed that you are eligible for a Chapter 7 filing.
Understanding Income Requirements
Properly determining current monthly income (CMI) is a necessity. Mistakes on the bankruptcy paperwork, especially regarding income, could easily disqualify you from filing Chapter 7 bankruptcy. Your CMI is the average monthly income you received over the prior six months to filing for bankruptcy. There are some exceptions to what income must be included in the calculation; the guidance of a knowledgeable bankruptcy attorney is suggested.
What Income Deductions are Considered?
There are a number of legitimate deductions that will impact the income available for paying off debts. The Internal Revenue Service (IRS) has established national and local standards for certain expenses. When determining income deductions you must consider:
- how many people live in your home;
- expenses for food and clothing;
- out-of-pocket health care allowance;
- housing and utilities expenses;
- transportation expenses;
- vehicle operation and ownership/lease expenses;
- public transportation expenses;
- federal, state and local taxes owed;
- involuntary payroll deductions from your employer;
- Insurance premiums;
- court-ordered payments;
- education expenses;
- childcare expenses;
- telecommunication expenses; and
- secured and tax debt payment expenses.
You may have additional expenses that are not listed above. Théda is willing to work with you to make sure there is a complete, accurate picture of your financial situation.
Determining Whether Presumption of Abuse Exists
Guidelines for presumption of abuse were established as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). These guidelines are in place to ensure that people who are fiscally able to pay off debts do not have a means to walk away from their financial responsibilities. Should the results of The Means Test indicate a presumption of abuse, it may be rebutted with proof of documented special circumstances. If those special circumstances are rejected, it may be possible to opt for a Chapter 13 bankruptcy filing.
Contact A Plano Chapter 7 Bankruptcy Attorney
If you are considering filing bankruptcy, but are not sure if you meet the qualifications please contact our bankruptcy lawyer by dialing 214-618-2101 You may schedule an initial complimentary consultation to discuss your concerns. Our Frisco, Texas bankruptcy law firm proudly serves the men and women of Collin County, Denton County, The Colony, Little Elm, Prosper, Celina, Plano, Carrollton, Lewisville, Flower Mound and McKinney. We are ready to help you.